The Comdex is not a rating, but a composite of all the
ratings a company has received.
Ratings have become one of the most important pieces of
information about a life insurance company. They provide a reference to judge
the financial health of a company, and a way to compare one company to another.
Unfortunately the services don't use a universal
ratings scale. Two services use the " A through F" scale, but they
each apply it very differently. Two other rating services use the same
"triple-A" scale used in rating bonds.
There is also the problem of "crossover," where
the same letter rating is used by two different rating companies and has two
different meanings. For example, and "A+" from Best is the second highest
rating that can be assigned, and is not considered an excellent rating.
Comparisons of letter ratings between the rating services are useless.
In order to clear up this confusion, it is necessary to
take a step back from the letter ratings themselves. The actual letter rating
that is assigned to a company is not as important as the number of companies
that are rated higher or lower than the company.
A better way to look at the ratings is to look at the
percentiles that the ratings represent. The percentile gives the
percent of insurers that are ranked lower than a given company. If a company is
in the 80th percentile, 20% of the companies are ranked higher and 80% are
ranked lower. This is the common way of reporting test results for most
national student testing. When considering a large number of students, the
absolute test score is not as important as the percentile, the percentage of
students that scored better and the percentage of students that scored worse.
We calculate a composite index, the Comdex, which is
the average percentile of a company's ratings. The Comdex is not a
rating itself. It is a composite of all of the ratings that the company has
received. The Comdex gives the company's standing, on a scale of 1 to 100, in
relation to other companies that have been rated by the services. It is an
objective value based solely on the mathematical distribution of all of the
companies that have been rated.